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PropTake: Beware CRE Middlemen and Women Everywhere

Middle-men and women everywhere, beware. As has been the case in many other industries, the real estate stack is being cut down by disruptive companies who see the margins of antiquated middlemen as their areas of opportunity (Bezos's favorite saying).

Thelatest example comes from Zillow, the residential tech behemoth announcing that it will now buy and flip homes, officially moving from a pure tech company to a tech-enabled real estate company. As the article points out, they are hardly the first player to make this move as Opendoor has been applying this model for some time and Redfin has somewhat cut out the middleman in the sense of hiring its own brokers.

Real estate has always been a very fractured industry as true scale has been hard to coordinate and execute. However with online technologies that enable companies like Zillow to gain an edge on the competition from a data and distribution standpoint, we are going to see a few companies who gain this upper hand achieve economies of scale and cut out middlemen along the way.

It has been the trend that commercial has trailed residential in terms of some internet tech adoption, but the race for leveraging technology in order to vertically integrate or at least cut out one level of middlemen is well under way in CRE.

What is different in the commercial space is that the traditional big five service firms who occupy much of the middle ground are moving aggressively into the technology space while many startups are trying to put themselves into the stack as a middleman.

This game is a capital arms race, as there is very little defensibility around leasing and re-leasing space. The question will be who can effectively cut out levels of the stack vs. creating new middleman businesses, which is how innovators tend to find staying power.

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